The Influence Of Income Distribution Inequality On Export

With the development of globalization, all countries in the world have made great progress in economic construction, among which international trade plays a key role in pushing the economic growth. However, inequality in income distribution became a worldwide problem, which may affect social stability and restrict economic growth. Income inequality includes inter-country inequality and intra-country inequality. There exist a lot of studies about how international trade affects income distribution, while there are little studies examining the influence of income inequality on international trade. Based on the existing studies, the present paper focuses on the demand side effect on export. In the model, high income country and low income country specialize in a vertically-differentiated product that is traded with the rest of the world. Both of the countries have high-income household which only consume high quality product and low-income household of which those who prefer high quality consume high quality product and the rest consume low quality product. When income distribution becomes more unequal, the number of household which prefer high quality product decreases and export increases in the high income country. The number of household which consume low quality product increases and export decreases in the low income country. Then we use penal data of51countries from1980to2002to examine the model empirically. According to the econometric model and the stability test, we conclude that income inequality has significantly positive relationship with export in high income country and not significantly negative relationship with export in low income country. Compared with the related paper, we think that the empirical significant difference is because the export in high income country is affected by quality rise and quantity increase while export in low income country is only affected by quantity increase. In the end, we give some suggestion to high income countries and low income countries for policies on income equality and international trade.